Servicing
It’s time we give homeowners more control (and peace of mind) during servicing transfers
By Sandra Madigan | Executive Vice President of Servicing Technology Product Innovation, ICE Mortgage Technology
October 24, 2024 • 7 min read
When it comes to buying a home — the largest purchase many of us will ever make — people often seek recommendations from trusted sources, such as real estate agents, co-workers or friends. As for their lender, an easy buying experience, in-depth professional guidance, or rock-bottom rates may be on their check list. At the end of the day, borrowers want a sense of comfort and security in someone they consider their “real-estate life partner.”
However, many homeowners may not realize that the relationship with their chosen lender might not last as long as they expect. After closing on a home and even making a few payments, it’s likely that their mortgage will be sold to another company or investor or that the Mortgage Servicing Rights (MSRs) to their loan will be transferred to a subservicer who is responsible for servicing the loan. This can happen several times over the course of a few years and become a deep source of anxiety for homeowners.
Unlike nearly every other financial relationship in life, homeowners cannot choose who manages their escrow and will collect their mortgage payments each month. Even more upsetting for some homeowners is that they'll receive a series of communications about who and how they must pay to keep a roof over their head — and some of these letters can seem vague or be misread and assumed to be junk mail. But they are required by law.
To keep borrowers in the loop, federal law requires two notices be sent to affected homeowners. First, they receive a “goodbye” letter at least 15 days before a transfer’s effective date. This written notification from their mortgage originator or current servicer tells them the transfer will be happening and provides details on who will be taking over the servicing on their loan.
No more than 30 days after the effective date, homeowners should receive a “hello” letter from the new servicer informing them in writing that the loan has, indeed, moved to a new company and providing them with the new company’s name, address and contact information and any other instructions for their payments.
Feeling powerless
Let’s face it. A lot can go wrong when loans are being transferred from one company to another, even if the letters were sent to the correct address and at the right time.
The homeowner may not open physical mail coming to the home or have it forwarded to their current address and may be unaware of where to send their next payment or how to transfer their automated mortgage payments to the new servicer. Their first “heads up” they’ve missed something may be when their old servicer returns a payment or they receive a phone call or email from the new servicer telling them they are 60 days late on their payment.
None of this loan shuffling activity can be controlled by the homeowner and they may, in fact, not understand what’s happening at all. Should they be in the middle of a loan modification or in a forbearance period, for example, they’ll now be working with a new company. For some homeowners, just thinking about telling another stranger why they missed their loan payments or sent them late can be a new source of anxiety and something they’d rather avoid altogether.
They may just put off contacting the servicer for days (or months) and soon be in a much worse situation or put their property in danger of foreclosure, a situation nobody wants.
Transfer dashboard
At ICE Mortgage Technology, we’re humans and homeowners too. We empathize with this pain on the part of homeowners and want to support both them and our servicing customers as these changes are taking place in their lives.
We are working within our end-to-end mortgage technology ecosystem to create an agnostic “transfer tracker” so servicers can keep their homeowners better informed during servicing transfers.
With this tool, the “old” servicer or lender would provide the homeowner with a personal link to the tracker where they can find and view their loan data. The dynamic tracker would inform borrowers of where they’re at in the transfer (where to send payments and when to stay current) and provide them with any documents that need to be re-signed (like bank ACH forms) so they won’t miss a payment if they’re sent automatically or have it sent to the wrong company.
This alleviates the borrower having to calendar these changes separately or finding out years later that payments were being recorded as “late” by the new servicer and have impacted their credit when they go to take out a new loan (yes, this is a true story I heard recently). It will also eliminate having borrowers whose loans are being transferred flood call centers with questions about the transfer status.
As we envision it, the transfer tracker will allow homeowners to see information about their loan including the balance, loan terms, payments, and escrow account balances, and present them with milestones of things that will happen or when they need to take action. Should they be in the middle of a loss mitigation issue, for example, all of that information would be visible too so the homeowner can check it over for accuracy to ensure they’re on the same page as the new servicer and not miss a payment or send it late.
Helping your homeowners
This technology will be available for servicers using MSP and other servicing platforms in the fall. Our goal is to provide the industry with a tool that will relieve a lot of customer pain points during the transfer process and help safeguard the accuracy of data as it moves from one company to the other.
By providing more transparency to homeowners during servicing transfers, your company will make a good impression with consumers and may stick in their minds when it’s time to refinance or get another loan.
ICE Mortgage Technology also is working within its end-to-end mortgage technology universe to ease the loan-transfer pain points for servicers. If you’re interested in finding out more, check out this post by my colleague Dana Federspiel.
Related resources
Access Mortgage Monitor reports
2024 Borrower Insights Survey report